Last month I wrote a piece about SB-94 in California and how the State Bar out there is running a bit fast loose with its interpretation of how it applies to attorneys.
In fact, what I wrote was:
In an unprecedented move that can only be described as stunning ignorance, the California State Bar recently released a legal opinion that will effectively deny legal representation to millions of homeowners faced with foreclosure. The controversy is around SB-94, a law put into effect in 2009 that was meant to protect homeowners from predatory loan modification companies.
A bit harsh? Perhaps, but despite some of the comments and emails I've received I stand by it, because the other possible theory is that the California Bar is evil, paid off, and being bribed. As much as I'd like to write an extensive article about that, there's no real evidence to support that theory.
According to a number of attorneys I've spoken with on this matter, since 2009 the CA State Bar has inexplicably taken two fundamentally opposing positions regarding fees for pre-negotiation services which are necessary for a successful loan modification. On one hand, the Bar has successfully argued in court that only the negotiation with the lender is covered by SB-94. Now, they are prosecuting attorneys for accepting fees after providing contracted evaluation services, in a manner they previously found acceptable.
The controversy is so ripe that attorney Robert Scurrah of CDA Law Center filed a Declaratory Relief lawsuit in Orange County Superior Court this past September on the grounds that it violated the 14th Amendment, due process and the equal protection clause of the Constitution because the statute, as applied and in practice, effectively prohibited a homeowner from obtaining legal advice regarding mortgages, since no lawyers would undertake representation if they couldn't get paid. They are asking a judge to determine what the law really says. So, this Thursday a Superior Court Judge will determine and interpret how this law should be applied.
If the judge agrees with the California Bar's highly questionable take on SB-94 and how it applies to the civil code, homeowners in California will be left to fend for themselves when it comes to mortgages and fraud. Not to mention, they will be at the mercy of scam artists and scumbags bilking them for more money in return for more heartbreak.
The State Bar, for its part, claims that it is simply trying to protect homeowners from scammers and that it has received "numerous" complaints from homeowners who have been ripped off by attorneys and they have proof.
Here it is: According to the bar's own press release issued on September 27, 2012, they claim that since 2009 in California, there have been 700 lawyers disbarred. Twenty-two of them were disbarred related to loan modifications -- There's no indication of how many of them were related to SB-94. By the way, the state of California has 37 million residents, 500,000 foreclosures to-date, and over 200,000 licensed attorneys, so 22 in three years isn't as egregious as the bar would like us to believe.
Additionally, and this is important, since SB-94 has become state law the number of complaints has remained a constant and both the number and size of scams has increased significantly. So why is the bar sticking its nose in this? Particularly since California's Attorney General, Kamala Harris, pushed through the California's Homeowner Bill of Rights which went into effect as of January 1, 2013. It specifically says that homeowners may hire lawyers to represent them in the loan modification process. The bills even provide for a private right of action for certain violations by servicers, which specifically means that homeowners are permitted to sue for damages in these instances.
There have been thousands of California homeowners who have saved their homes by hiring lawyers to help them get their loans modified. Most tried it on their own and failed. They hired a lawyer and succeeded. CDA Law Center, one if the Trusted Attorneys on Home Preservation Network, has helped more than four thousand homeowners in obtaining loan modifications from their lender or servicer -- in other words $1.5 billion in home loans for homeowners who are now current on their payments and able to keep their home.
Of course, we don't hear much from them. They're at home thankful that the ordeal is over and they didn't lose their homes to foreclosure. These people don't come forward and sing the praises of an attorney who essentially did what he was hired to do. All the bar hears is the complaints from disgruntled homeowners who either actually got screwed or, in some cases, didn't get as good a deal as they wanted.
I've probably spoken to and heard from thousands of homeowners over the last few years and foreclosure is not something most people want to talk about. There's a tremendous amount of guilt and shame we've been conditioned to take on and let's face it, there are still those illiterates who think the entire financial meltdown was somehow caused by greedy homeowners.
The simple fact is attorneys help homeowners and are more effective and qualified when it comes to negotiating and getting loan modifications for those homeowners.
Take Susan Crane who played the paperwork shuffle with Chase for over a year after being told, by Chase, that she would have to stop making her payments in order to qualify for a modification. After being turned down she hired CDA Law Firm.
"I am so grateful to the people there. They held my hand and wiped away my tears," the 70-year-old Rancho Santa Margarita woman says. "I truly believe I wouldn't have my home if it weren't for them."
And there's Sandy Sepulveda, whose husband's plumbing business slowed down when the economy tanked. She was also told by her bank that she would have to stop making payments before anyone would consider them for a modification. Reluctantly, she did, applied for a modification, sent in endless amounts of paperwork for the better part of a year and was eventually denied and facing foreclosure.
"I couldn't have done it without CDA," Sandy says. "It's a shame that they have to cluster the good with the bad, when the good are helping people who need it."
And yet, the California State Bar wants to make it virtually impossible for homeowners to get this kind of help.
You certainly don't see Michelin or Zagat closing down restaurants all over the state because a handful of people complained about the food or the service in one establishment. They rarely drop a star without investigating, because even they know that some complaints are without merit and people are more likely to complain about a bad experience than they are to give kudos when they have a good experience -- particularly when that's the whole idea. Even the board of health conducts an investigation and comes to its own conclusion when they get a call.
The actions of the bar when it comes to SB-94 and attorneys may not be the actions of an evil or corrupt organization, which would make for a better story. It is, however, looking more like an organization that is fundamentally lazy, ignorant, and unwilling to investigate what's going on in the trenches and how their actions will cause more harm to homeowners who have taken the brunt of the financial meltdown.